Business ideas come from all types of life experiences. For Tom Scott, it was his daughter’s wedding about six years ago.
Scott, vice president and general manager for Oliver’s Markets, noted his daughter wanted a personalized label on the wines served at her wedding. After brief moment of exasperation, Scott turned to his wine and spirits buyer, Richard Williams, and asked: “Richard, can I get this done — and what the hell is this going to cost me?”
The skeptical, yet dutiful father prevailed, and was able to source some wine with help from Vintage Wine Estates in Santa Rosa. The result: Susy and Ryan’s Zinfandel and Susy and Ryan’s Sauvignon Blanc was served at the wedding of the Tammingas.
“It was quite the hit. It was delicious wine,” Scott said. “And after that I was going, ‘If we can do this on that scale . . .’”
Fast forward to beginning of April, and the Santa Rosa-based grocery chain has introduced its Oliver’s Own wines at its three stores. They are sourced with grapes from Sonoma County appellations and will be offered at three different price ranges from around $10.99 to $15.99 per bottle, though they are currently being discounted during a three-month product launch.
The sales have been better than expected, with Williams calling the first nine days “astronomical.”
The introduction of Oliver’s Own offers a window into a hidden but significant part of Sonoma County’s wine industry. While they aren’t imbued with the grand romance of the county’s elite wineries, whose names are recognized around the world, private labels and their related subsets are an integral business for local growers and wineries.
Private label wines are wines made exclusively for a single retailer and are sold under the retailer’s brand, not the winery’s brand. They represent anywhere from 5 to 10 percent of the U.S. wine retail marketplace, according to wine executives and analysts, though it is not readily tracked. But all interviewed agree it will continue to increase.
“It’s real interesting,” said Phil Hurst of Oliver’s Markets’ decision. Hurst co-founded Novato-based Winery Exchange Inc., which was one of the first companies to do a U.S. private label wine business in the early 2000s, and now is chief executive officer of Truett-Hurst Inc. “It’s a sign that the private label market is growing,” he said.
The concept is not new. After all, wine negociants go back to the 1600s as Dutch shipping firms helped expand exports of the Bordeaux region. It remained popular in Europe, and in some countries the estimated private label wine market can reach as much as 50 percent penetration, with big retailers such as U.K.-headquartered Tesco and German-based Aldi controlling much of the market.
Economics of wine
The economics of the private label business make sense on a number of levels. For the supplier it offers a willing buyer, an important incentive in an industry where it is widely acknowledged that it is harder to sell wine than it is to make it. It can also yield bigger profit margins for suppliers, who can bypass many of the costs that wholesalers tack on when selling branded wine.
At times, it also has been born out of necessity. For example, after the Internet stock bubble burst in the early 2000s, vintners found themselves with a lot of quality wine and a shortage of buyers, said David Francke, executive vice president for Purple Wine Co. in Graton, which makes around 200 different wines from small customers to those that need 10,000 cases.